A federal district court says Veoh, a Web video site that has come under legal fire from entertainment companies the past several years, is not liable for the copyright violations committed by its users, a decision that could help YouTube defend itself against Viacom's $1 billion copyright suit.

Universal Music Group, the largest of the four top record companies, accused Veoh of copyright violations in a lawsuit filed two years ago. But on Friday, U.S. District Judge A. Howard Matz granted Veoh's motion for summary judgment, and ruled that the company is protected against such claims by the Digital Millennium Copyright Act.

The decision would have meant more for Veoh if the video site was still relevant. The company has fallen on hard times since YouTube and Hulu took control of most of the online-video sector. Veoh's legacy, however, could be that it helped to establish that Internet service providers aren't liable for crimes committed by users.

To be sure, Universal Music will file an appeal to Matz's decision and the case likely still has a long way to go.

"The ruling today is wrong because it runs counter to established precedent and legislative intent and to the express language of the DMCA," Universal Music said in a statement. "Because of this and our commitment to protecting the rights of our artists and songwriters who deserve to be compensated for the use of their music, we will appeal this ruling immediately."

Martz's decision is not binding on other courts and it must be noted that the case was heard in the Ninth District while YouTube's court fight is in the Second District.

"Our case is in a different forum, not bound by the Veoh case," said Michael Fricklas, Viacom's general counsel, in a statement. "We remain confident that we will prevail on the law and the facts. Today's decision contradicts the consensus that sites and copyright owners share the responsibility to use readily available tools to minimize copyright infringements."

How YouTube may benefit
YouTube and Google could be the big winner in all of this, said Fred von Lohmann, senior attorney for the Electronic Frontier Foundation. Viacom accused YouTube of infringing its copyright in a lawsuit filed in March 2007.

"Veoh's policies are very similar to YouTube's," von Lohmann said. "The judge gave Veoh a clean bill of health. I think the court in New York (where the Viacom-YouTube case is being heard) is going to take this ruling very seriously. The facts are very, very close."

In Martz's decision, he noted that this was not the first time a court has ruled that Veoh is covered by the DMCA's Safe Harbor provision.

"On August 27, 2008, Magistrate Judge Howard R. Lloyd, sitting in the Northern District of California, wrote that the court does not find that the DMCA was intended to have Veoh shoulder the entire burden of policing third-party copyrights on its Web site (at the cost of losing its business if it cannot)," Martz wrote in his decision.

"Rather, the issue is whether Veoh takes appropriate steps to deal with copyright infringement that takes place. The record presented demonstrates that, far from encouraging copyright infringement, Veoh has a strong DMCA policy, takes active steps to limit incidents of infringement on its Web site, and works diligently to keep unauthorized works off its Web site. In sum, Veoh has met its burden in establishing its entitlement to safe harbor for the alleged infringements here."

While the judge ruled against Universal Music group and delivered a blow to copyright owners, he also confirmed that such sites must take reasonable steps to stop infringement once they've been made aware of its existence on their sites.

The legal fight between Viacom and YouTube will likely go to trial sometime next year. Many observers thought that case would be the one to establish whether managers at YouTube and similar services would be required to police their sites. But YouTube vs. Viacom could be anticlimatic, according to von Lohmann.

"The ironic thing is that so much attention has been paid to the YouTube litigation," von Lohmann said. "But the law is actually being made in other cases because the YouTube case is turning into an eternal trench war. In the meantime, smaller companies like Veoh and Perfect 10 are defining the law. The courts have consistently given an interpretation (of the law) that has been in line with what Web 2.0 companies have been arguing."